Small Cap Value Tailwind Beginning

Small Caps could have a Five-Year Tailwind | Breach Inlet Capital
  • After years of vast underperformance, Small Cap Value stocks have returned -11% compared to -26% for Large Cap Growth stocks YTD.
  • History and valuations suggest we are in the early innings to capture this opportunity and can be telling as to what investor sentiment will look like going forward.
  • We believe small cap value strategies are well-positioned to provide investors an opportunity to compound capital in this next cycle. The graphs below tell the story for Small Cap Value.

A Difficult 5 Years for Small Cap Value (2017-2021)

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But Small Cap Value Has Outperformed YTD ’22

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Small Cap Value Fwd P/E 32% Discount vs. S&P 500 Growth

PE Graph

We’ve Seen This Before…Small Cap Value
Underperformed ’95-’99

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But Then Small Cap Value Outperformed ’00-’06 (7 Years!)

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Ultimately, Small Cap Value Outperformed Over ’95-’06

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Rising Rates Are Historically a Relative Tailwind for Small Cap Value


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[1] Small Cap Value Index represents data taken from the Russell 2000 Value Index returns ending June 10, 2022. The Large Cap Growth Stock returns represent data from the S&P Growth Indices.

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